JOIN USFlight of foreign capital hit investors, rupee hard
The foreign capital, that controls about one-third of the Indian equity market, has yet again brought the Indian equity investors to their knees along with hitting Indian currency hard amid the COVID-19 scare.
As the foreign money in India has taken the flight to safety in a manner that is unprecedented, the foreign institutional investors (FIIs) and foreign portfolio investors (FPIs) have withdrawn close to Rs 63,000 crore ($8 billion) from the Indian markets in a month’s time.
As foreign funds have withdrawn a huge sum of monies amid the global economy sliding into a recession, the wealth of the Indian equity investors stand at over 25% of their holdings in just a month.
Though the trend of foreign fund withdrawal is in sync with the broader trend seen since the note-ban, the March 2020 withdrawals have been more than twice that of its second-worst show seen in January 2008, when early shoots of the global financial crisis started to appear. In January 2008, the FIIs had withdrawn a net of Rs 29,447.51 crore from Indian markets, which has been literally dwarfed by the current months’ withdrawals.
“The index fell down sharply in March 2020 and as of now, it’s down by 26%. Ongoing fall was majorly led by sharp selling from the FIIs desk as they remained net sellers in the cash market segment on all trading sessions of March series and cumulatively sold equities worth Rs 60,000 crore,” says Chandan Taparia of Motilal Oswal.
Nifty has been making lower top – lower bottom and failed to hold its bounce even after the RBI and Government measures, he adds.
Such has been the foreign fund outflow, the domestic funds, backed by EPFO and LIC, couldn’t even come close to FIIs sales, except for in three trading sessions. Till now, the domestic institutional investors have parked in Rs 11,000 crore less than what FIIs have withdrawn from the Indian markets (almost Rs 52,000 crore).
This has had an adverse impact on the rupee as well, which has crashed by 5% in a month, despite crude oil prices tanking 47.45%.